Wednesday, March 04, 2009

Received in the mail this morning a letter which included the following:

"...small employers that are exempt from COBRA (e.g. employers with less than 20 employees) but subject to state continuation laws [ed: "mini-COBRA] will have to comply with the new subsidy requirements..."

"The new rules require employers to send out special notices and to allow certain individuals who originally declined coverage a second opportunity to elect to continue coverage." [emphasis added]

Now, this is from a noted expert on COBRA (in fact, he's one of our favorite CE instructors on the subject), so one might presume that this could be taken as "gospel."

Not so fast.

Let's back up a moment: as we've discussed, the Spendulus included some radical changes to COBRA, one of which extended the "subsidy" to smaller groups. From what we've learned so far, this applied only to the "subsidy" itself, not the notification requirements. Until now, Ohio (for example) had none: it was up to the (former) employee to seek out that coverage continuation. COBRA requirements in that area, however, are onerous, and almost always contracted out by employers. This is cost-effective for a larger group, but prohibitive for smaller ones.

If true, this new notification requirement would be a severe blow to any small employer's budget: under COBRA, the penalties for screwing up notifications are severe and not just applicable to the employer, but to the hapless employee who was assigned the task. So many groups (and most of the smart ones) contract with a COBRA administrator to handle this chore. That's probably not an option for a group of, say 10 or 12 employees, so the temptation to do this in-house will be great.

And unwise.

I'm still not convinced that this is the new law of the land, however. We've been keeping a very close watch on this issue, and haven't seen this particular item come in, except for this letter. So I called the Department of Insurance to see if they knew about it.

They did not.

In fact, their response was to "stay tuned" because the Department of Labor (the federal agency tasked with overseeing COBRA) was still ironing out details. Better yet, I clicked on over to the DOL, and found a brief FAQ about the new rules, none of which addressed the notification issue at the state level. Ditto at the dedicated COBRA site.

Received in the mail this morning a letter which included the following:

"...small employers that are exempt from COBRA (e.g. employers with less than 20 employees) but subject to state continuation laws [ed: "mini-COBRA] will have to comply with the new subsidy requirements..."

"The new rules require employers to send out special notices and to allow certain individuals who originally declined coverage a second opportunity to elect to continue coverage." [emphasis added]

Now, this is from a noted expert on COBRA (in fact, he's one of our favorite CE instructors on the subject), so one might presume that this could be taken as "gospel."

Not so fast.

Let's back up a moment: as we've discussed, the Spendulus included some radical changes to COBRA, one of which extended the "subsidy" to smaller groups. From what we've learned so far, this applied only to the "subsidy" itself, not the notification requirements. Until now, Ohio (for example) had none: it was up to the (former) employee to seek out that coverage continuation. COBRA requirements in that area, however, are onerous, and almost always contracted out by employers. This is cost-effective for a larger group, but prohibitive for smaller ones.

If true, this new notification requirement would be a severe blow to any small employer's budget: under COBRA, the penalties for screwing up notifications are severe and not just applicable to the employer, but to the hapless employee who was assigned the task. So many groups (and most of the smart ones) contract with a COBRA administrator to handle this chore. That's probably not an option for a group of, say 10 or 12 employees, so the temptation to do this in-house will be great.

And unwise.

I'm still not convinced that this is the new law of the land, however. We've been keeping a very close watch on this issue, and haven't seen this particular item come in, except for this letter. So I called the Department of Insurance to see if they knew about it.

They did not.

In fact, their response was to "stay tuned" because the Department of Labor (the federal agency tasked with overseeing COBRA) was still ironing out details. Better yet, I clicked on over to the DOL, and found a brief FAQ about the new rules, none of which addressed the notification issue at the state level. Ditto at the dedicated COBRA site.